Federal Tax Credits for Energy Efficiency

The Inflation Reduction Act of 2022 is all about giving Americans the power to make their homes and buildings more energy-efficient. With this act, the government offers federal tax credits and deductions, helping to cut down on energy costs and demand while we move towards cleaner energy sources.

How the Tax Credits Work for Homeowners

• Save Up to $2,000 on Costs of Upgrading to Heat Pump Technology

These energy-efficient home improvement credits are available for 30% of costs – up to $2,000 – and can be combined with credits up to $1,200 for other qualified upgrades made in one tax year.

Air Source Heat Pumps Tax Credit

This tax credit is effective for products purchased and installed between January 1, 2023, and December 31, 2032.

• • You claim 30% of the project cost.
  • $2,000 maximum amount credited.

What products are eligible?

• Ducted or non-ducted (mini-splits) Heat Pumps:
  • Ducted: Heat pumps designated as ENERGY STAR Cold Climate that have an EER2 > 10
  • Ductless (mini splits): ENERGY STAR Cold Climate heat pumps with:
    • SEER2 > 16
    • EER2 > 9
    • HSPF2 > 9.5

Heat Pump Water Heaters Tax Credit

This tax credit is effective for products purchased and installed between January 1, 2023, and December 31, 2032.

• • You claim 30% of the project cost.
  • $2,000 maximum amount credited.

What products are eligible?

Heat pump water heaters that have earned the ENERGY STAR are eligible for this credit.
Note: Under the tax code, eligible equipment must “meet or exceed the highest efficiency tier (not including any advanced tier) established by the Consortium for Energy Efficiency which is in effect as of the beginning of the calendar year.” The eligibility described above is consistent with this requirement.

Water Heaters (Natural Gas) Tax Credit

This tax credit is effective for products purchased and installed between January 1, 2023, and December 31, 2032.

• • You claim 30% of the project cost.
  • $600 maximum amount credited.

What products are eligible?

Gas storage water heaters: ENERGY STAR-certified models are eligible as follows: > 0.81 UEF for tanks less than 55 gallons and > 0.86 UEF for tanks greater than or equal to 55 gallons.
Tankless gas water heaters: ENERGY STAR models with > 0.95 UEF are eligible.

Furnaces (Natural Gas, Oil) Tax Credits

This tax credit is effective for products purchased and installed between January 1, 2023, and December 31, 2032.

• • You claim 30% of the project cost.
  • $600 maximum amount credited.

Who can use this credit?

Principal Residence Homeowners. Must be an existing home & your principal residence in the United States. New construction and rentals do not apply. It can include a house, houseboat,  mobile home, cooperative apartment, condominium, and a manufactured home.

What products are eligible?

• Gas Furnaces: ENERGY STAR-certified gas furnaces with AFUE > 97% are eligible.
  Note: Under the tax code, eligible equipment must “meet or exceed the highest efficiency tier (not including any advanced tier) established by the Consortium for Energy Efficiency which is in effect as of the beginning of the calendar year.” The eligibility described above is consistent with this requirement.
• Oil Furnaces: ENERGY STAR-certified oil furnaces that use certain fuels are eligible. The equipment must be rated by the manufacturer for use with fuel blends at least 20 percent of the volume which consists of biodiesel, renewable diesel, or second-generation biofuel.

Hot Water Boilers (Natural Gas, Propane, Oil) Tax Credit

This tax credit is effective for products purchased and installed between January 1, 2023, and December 31, 2032.

• • You claim 30% of the project cost.
  • $600 maximum amount credited.

What products are eligible?

• Gas Boilers: ENERGY STAR-certified gas boilers with AFUE > 95% are eligible.
  Note: Under the tax code, eligible equipment must “meet or exceed the highest efficiency tier (not including any advanced tier) established by the Consortium for Energy Efficiency which is in effect as of the beginning of the calendar year.”  The eligibility described above is consistent with this requirement.
• Oil Boilers: ENERGY STAR-certified oil boilers that use certain fuels are eligible.  The equipment must be rated by the manufacturer for use with fuel blends at least 20 percent of the volume which consists of biodiesel, renewable diesel, or second-generation biofuel.

Central Air Conditioners Tax Credit

This tax credit is effective for products purchased and installed between January 1, 2023, and December 31, 2032.

• • You claim 30% of the project cost.
  • $600 maximum amount credited.

What products are eligible?

For split systems, ENERGY STAR-certified equipment with SEER2 > 16 is eligible. All ENERGY STAR-certified packaged systems are eligible.

Note: Under the tax code, eligible equipment must “meet or exceed the highest efficiency tier (not including any advanced tier) established by the Consortium for Energy Efficiency which is in effect as of the beginning of the calendar year.” The eligibility described above is consistent with this requirement.

Heating and Cooling System Rebates

Dealing with heating and air conditioning issues isn’t just about money. Families count on these systems to keep them cozy and healthy throughout the year. If you’re facing problems like a failed compressor, a big refrigerant leak, or a cracked heat exchanger, it might be time to repair or replace your HVAC system. But if your system is just too old for repairs, a replacement may be the best option. Knowing your options can really make a difference.

Available rebates for non-operational HVAC system replacement*

* Systems with a critical component failure such as a failed compressor, a cracked heat exchanger, or an excessive refrigerant leak.

** Energy efficiency rating as certified by the Air Conditioning, Heating, and Refrigeration Institute (AHRI).

Available rebates for early replacement of operational HVAC systems

If a repair doesn’t seem worth it because of the cost or if your system keeps acting up, it might be smart to consider switching to a more efficient one before it completely gives out. A skilled contractor can make this decision a lot simpler by checking out your current setup and making sure you’re comfortable with the choices.

Here are just a few signs that you should upgrade your heating and cooling system early:

• System runs for long times even in mild weather
• System does not maintain or achieve a set temperature
• Yearly refrigerant/recharging of the AC system
• Comfort issues/humidity; odors are present even when the system is running
• System turns on and off randomly
• High energy bills

Taking timely action, before your system gives out, could snag you a rebate for upgrading and cutting down on costs. To snag this early replacement rebate, your system should still be up and running (handling both heating and cooling), and it shouldn’t have a failed compressor, cracked heat exchanger, or a big refrigerant leak.

*Energy Efficiency Rating as certified by the Air Conditioning, Heating, and Refrigeration Institute (AHRI)

**Must condition 1,000 sq. ft. of conditioned living space

Eligibility requirements

To be eligible, you must be a Duke Energy electric customer, and your new equipment must be installed by one of their participating contractors. Also, your equipment must meet the SEER(2)/EER(2)/HSPF(2) requirements listed in the table above.
This program is available to Duke Energy residential electric service customers residing in single/multi-family homes, condominiums, mobile homes on permanent foundations, townhomes, and duplexes.
Additionally, all applications and supporting documentation must be successfully submitted and approved within 60 days of the date of service.